DEEPAK Nitrite has recorded a huge jump in its bottomline from Rs. 5.84 crore in 1997-98 to Rs. 11.22 crore, a growth of 92.27 percent. In a year that has seen mediocre growth rate at best, Deepak’s performance stands out. Especially so as it is in the chemical sector, which has been one of the worst hit in recent times. The performance is spectacular, as turnover has increased only by 4 percent from Rs. 153.69 crore to Rs. 159.85 crore.

One of the reasons for the spectacular growth rate has been that operating margin, which has improved from 16.13 percent to 18.83 percent. This, in a year when chemical prices have touched historic lows comes as surprising. However, Deepak Mehta, managing director of the company said that lower raw material prices and the fact that the company is involved in speciality chemicals has helped in improving margins. Apart from this, the company has managed to keep a tight control on its cost. Margins have also improved because of higher capacity utilisation (almost all of the company’s plants are running at nearly 100 percent utilisation) which has helped distribute overhead costs.

Another factor that has helped the company is increased exports. Deepak Nitrite’s exports have increased by 40 percent from Rs. 26.65 crore to Rs. 37.46 crore. Mehta says that the company has managed to achieve higher growth rate as a result of exporting only to dollar-denominated markets like the US, Japan, Korea and Europe.

Deepak Nitrite has four main divisions, Nitroaromatics, Nitrite, Sahyadri Dyestuffs & Chemicals and the Taloja Chemical Division. The first three divisions account for nearly 25-30 percent of the sales each. In the dyestuff division, the company is focusing on producing customised products as well as adding value to some of the existing products. The high quality of research involved can be judged from the fact that DEMAP (one of the products manufactured by the dyestuff division) was traditionally used in the country for dyeing of turban and during holi festivals. Value has been added to this crude product, which is now being exported to places where it is used in the highly precision application of electronic imaging.

Enthused by the performance of the company, the management has increased dividends from 18 percent to 45 percent. Apart from the improved margins, the company has also benefited from a higher other income component, which has increased from Rs. 1.74 crore to Rs. 3.06 crore. This has been possible because of dividend from its group company Deepak Fertilisers. Deepak Nitrite has been continuously cutting down its interest cost, which during the year stood at Rs. 12.08 crore as against Rs. 13.91 crore in the previous year. This has been possible as the company prepaid and repaid loans to the amount of Rs 12 crore. The company’s debt equity ratio currently stands at 1.22:1, while its cost of fund is slightly lower than 15 percent.

According to Mehta, prices of the raw material are likely to remain low, though intermediate prices are likely to firm up. This is unlikely to affect the company, as it is integrated to a very large extent. The company is focussing on speciality chemicals, which is likely to improve growth as well as profitability. For introduction of new products, the company is continuously investing in R&D.

Considering the fact that the company has made inroads in the international market and is stressing of high realisation products, the future looks bright for the company.